New Alzheimer's drug could cost Medicaid more than $2 billion

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Aducanumab, a recently approved Alzheiemer's drug with a price tag of about $56,000, could strain Medicaid budgets, costing the program more than $2 billion a year if most beneficiaries switch over to it, according to a new analysis from the Kaiser Family Foundation.

Medicaid will see increased costs through direct payment of the drug for those who receive their drug coverage through Medicaid, as well as through potentially higher Medicare premium payments and cost-sharing for dual eligible beneficiaries, the report found.

Recent policy proposals targeted to accelerated approval drugs, as well as states' actions to address coverage issues for high-cost drugs in Medicaid, may mitigate the cost impact for Aduhelm, the brand name for aducanumab. But challenges remain in addressing the impact of high-cost drugs coming to market.

WHAT'S THE IMPACT?

Because of the structure of the Medicaid Drug Rebate Program, Medicaid must cover nearly all FDA-approved prescription drugs, including those approved through the accelerated approval pathway, though the program receives substantial rebates on most drugs. Medicaid rebates vary for brand-name and generic drugs and also account for price increases over time. 

Applying the 23.1% base rebate for brand drugs to Aduhelm, the yearly net price would be reduced to approximately $43,000. In Medicaid, states and the federal government share in both drug spending and drug rebates received. Using the average of federal and state shares of spending and rebates, state net spending per year per enrollee for Aduhelm would be roughly $13,800, and federal net spending would be about $29,200.

Nationally, 6 million people are estimated to have Alzheimer's disease, though most receive their drug coverage through Medicare. But even though Medicaid enrollees account for a small share of people with Alzheimer's disease, high per-enrollee costs could lead Aduhelm to have a large aggregate impact on Medicaid drug spending. 

Based on an analysis of Medicaid drug utilization data, KFF estimated that about 67,000 Medicaid beneficiaries used current drugs for Alzheimer's. If 25% of these beneficiaries switched to Aduhelm, the total net cost, post-rebate, would be around $720 million per year, states' share of spending would be $230 million and the federal share would be $490 million.

If 75% of these beneficiaries switched to Aduhelm, the total net cost would be more than $2 billion per year, which is 7% of current Medicaid net drug spending. States' share of spending would be $695 million, and the federal share would be $1.47 billion.

Medicaid will also share in the costs of providing coverage and care to dual eligible enrollees, the report found. Aduhelm is covered under Medicare Part B as a physician-administered drug, making it subject to the 20% Medicare Part B cost-sharing that Medicaid covers for most dual eligible people.

But, as allowed under federal rules, states often pay the "lesser of" the Medicare cost-sharing amount, or the difference between the Medicare payment and the Medicaid payment rate for the service, meaning states may not incur the entire 20%, or anything at all. If states do pay cost-sharing, they can also collect rebates for payments for the drugs, lowering their net cost.

Additionally, premiums for Medicare Part B may increase as a result of increased costs due to the drug, which would increase Medicaid payments on behalf of enrollees for whom Medicaid pays Medicare premiums. In 2019, the cost of Part B premiums to Medicaid was $19.7 billion in federal and state Medicaid spending, so even a small percentage increase could result in significant additional spending for Medicaid.

Other high-cost specialty drugs have had an impact on the Medicaid program, but Aduhelm stands out in that it's a high-cost maintenance drug, without a verified clinical benefit, that could potentially be widely prescribed, the report found.

THE LARGER TREND

When the FDA approved aducanumab, manufactured by drugmaker Biogen, there was controversy as to whether the drug was actually effective. But that hasn't stopped Biogen from teaming up with major payers, including Cigna and CVS Health, to increase patient access to the drug.

Partnering with Japanese pharmaceutical and research company Eisai, Biogen said last month that it intends to enter into a value-based contract with Cigna to streamline access to the drug, and will be tracking performance based on certain outcome metrics.

According to NPR, aducanumab has been controversial in that it's unclear whether it truly slows the progression of Alzheimer's disease. It has shown effectiveness at reducing plaques that build up in the brains of people afflicted with the disease, but separate studies have disagreed on whether it slows the decline in memory and thinking typically associated with Alzheimer's.

Among the FDA's conditions of approval is that Biogen will be required to conduct another clinical trial to confirm that the reduction of plaques translates into true clinical improvement. If that study fails to demonstrate the drug's efficacy, the FDA could withdraw the approval, effectively pulling the product from shelves.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com